Steve Ballmer had a dilemma. He had two groups at Microsoft pursuing competing visions for tablet computers.

One group, led by Xbox godfather J Allard, was pushing for a sleek, two-screen tablet called the Courier that users controlled with their finger or a pen. But it had a problem: It was running a modified version of Windows.

That ran headlong into the vision of tablet computing laid out by Steven Sinofsky, the head of Microsoft's Windows division. Sinofsky was wary of any product--let alone one from inside Microsoft's walls--that threatened the foundation of Microsoft's flagship operating system. But Sinofsky's tablet-friendly version of Windows was more than two years away.

For Ballmer, it wasn't an easy call. Allard and Sinofsky were key executives at Microsoft, both tabbed as the next-generation brain trust. So Ballmer sought advice from the one tech visionary he's trusted more than any other over the decades--Bill Gates. Ballmer arranged for Microsoft's chairman and co-founder to meet for a few hours with Allard; his boss, Entertainment and Devices division President Robbie Bach; and two other Courier team members.

Concept photo of Microsoft's Courier tablet
Gizmodo

At one point during that meeting in early 2010 at Gates' waterfront offices in Kirkland, Wash., Gates asked Allard how users get e-mail. Allard, Microsoft's executive hipster charged with keeping tabs on computing trends, told Gates his team wasn't trying to build another e-mail experience. He reasoned that everyone who had a Courier would also have a smartphone for quick e-mail writing and retrieval and a PC for more detailed exchanges. Courier users could get e-mail from the Web, Allard said, according to sources familiar with the meeting.

But the device wasn't intended to be a computer replacement; it was meant to complement PCs. Courier users wouldn't want or need a feature-rich e-mail application such as Microsoft's Outlook that lets them switch to conversation views in their inbox or support offline e-mail reading and writing. The key to Courier, Allard's team argued, was its focus on content creation. Courier was for the creative set, a gadget on which architects might begin to sketch building plans, or writers might begin to draft documents.

"This is where Bill had an allergic reaction," said one Courier worker who talked with an attendee of the meeting. As is his style in product reviews, Gates pressed Allard, challenging the logic of the approach.

It's not hard to understand Gates' response. Microsoft makes billions of dollars every year on its Exchange e-mail server software and its Outlook e-mail application. While heated debates are common in Microsoft's development process, Gates' concerns didn't bode well for Courier. He conveyed his opinions to Ballmer, who was gathering data from others at the company as well.

Two rising Microsoft executives differed on the company's vision for tablet computing.
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Within a few weeks, Courier was cancelled because the product didn't clearly align with the company's Windows and Office franchises, according to sources. A few months after that, both Allard and Bach announced plans to leave Microsoft, though both executives have said their decisions to move on were unrelated to the Courier cancellation.

The story of Microsoft's Courier has only been told in pieces. And nothing has been disclosed publicly about the infighting that led to the innovative device's death. This article was pieced together through interviews with 18 current and former Microsoft executives, as well as contractors and partners who worked on the project. None of the Microsoft employees, both current and former, would talk for attribution because they worried about potential repercussions. Microsoft's top spokesman, Frank Shaw, offered only a brief comment for this story and otherwise declined to make Microsoft's senior executives available.

"At any given time, we're looking at new ideas, investigating, testing, incubating them," Shaw said in a statement when word leaked in April 2010 that Courier had been cancelled. "It's in our DNA to develop new form factors and natural user interfaces to foster productivity and creativity. The Courier project is an example of this type of effort. It will be evaluated for use in future offerings, but we have no plans to build such a device at this time."

While the internal fight over Courier occurred about 18 months ago, the implications of the decision to kill the incubation project reverberate today. Rather than creating a touch computing device that might well have launched within a few months of Apple's iPad, which debuted in April 2010, Microsoft management chose a strategy that's forcing it to come from behind. The company cancelled Courier within a few weeks of the iPad's launch. Now it plans to rely on Windows 8, the operating system that will likely debut at the end of next year, to run tablets.

Courier's death also offers a detailed look into Microsoft's Darwinian approach to product development and the balancing act between protecting its old product franchises and creating new ones. The company, with 90,000 employees, has plenty of brilliant minds that can come up with revolutionary approaches to computing. But sometimes, their creativity is stalled by process, subsumed in other products, or even sacrificed to protect the company's Windows and Office empires.

'Not a whim'
Courier was much more than a clever vision. The team, which had more than 130 Microsoft employees contributing to it, had created several prototypes that gave a clear sense about the type of experience users would get. There were still tough hardware and software issues to resolve when Microsoft pulled the plug. But an employee who worked on Courier said the project was far enough along that the remaining work could have been completed in months if the company had added more people to the team. Microsoft's Shaw disputes that.

"There was extensive work done on the business, the technology and the experience," said a member of the Courier team. "It was very complete, not a whim."

Ballmer and Microsoft's senior leadership decided to bet solely on Sinofsky's Windows vision for the company's tablet strategy. Though it crushed some innovative work from dedicated employees, that decision had plenty of logic to it. Corporate customers may be more inclined to use a Windows tablet than, say, Apple's iPad, because those devices will likely include well-known management and security tools that should make them easy to plug into secure corporate networks.

A new survey by the Boston Consulting Group found that more than 40 percent of current tablet users in the United States want a tablet that runs Windows. That number jumps to 53 percent when non-tablet owners are included. The reason: familiarity with Windows, which still runs nearly 90 percent of all PCs sold.

"They think a common operating system will make this experience seamless across devices," said Boston Consulting senior partner and managing director John Rose. "The products will be introduced, and they'll be better (than the iPad) or they won't be."

Ballmer went out of his way to underscore Microsoft's Windows strategy at the company's financial analysts meeting last month, which it held concurrently with a conference where Microsoft wooed more than 5,000 developers to the Windows 8 platform for tablets.

"The first thing, which I hope is obvious, about our point of view is Windows is at the center," Ballmer told analysts. "Certainly I can read plenty of places where people will question whether that's a good idea or not. I think it's an exceptionally good idea."

But using Windows as the operating system for tablets also implies that Microsoft will update the devices' operating systems on the Windows time frame, typically every three years. Compare that to Apple, which seems likely to continue to update the iPad annually, a tactic that drives a raft of new sales each time a new generation hits the market. By the time Windows 8 rolls out, Apple will likely have introduced its iPad 3. Moreover, Amazon's much anticipated Kindle Fire tablet, which goes on sale November 15, will have nearly a year head start on the Windows-powered tablet offerings.

On the other hand, Courier, with its modified version of Windows, could have been updated more frequently than the behemoth operating system itself.

How far behind is Microsoft? Tablet makers sold 17.6 million devices in 2010, and are on a pace to sell 63.3 million more this year, according to industry analyst Gartner. In 2012, the firm expects sales to jump to 103.5 million devices. Just 4.3 million of those tablets, the ones that go on sale at the end of the year when Windows 8 debuts, will run Windows, according to the firm. Gartner expects Apple's game-changing iPad to continue to dominate with a two-thirds share.

Building consumer muscle
Microsoft counted on Allard, more than any other senior executive in the last decade, to help it figure out how to reach the types of consumers who are now racing to buy iPads. Once an Internet wonk who helped a mid-1990s Microsoft wake up to the Web, Allard led the team that created Microsoft's biggest non-PC consumer success story--the Xbox video game business. Always willing to stand up to leadership, Allard successfully argued that Windows wasn't suitable to power the video game console, something Gates wasn't initially keen on.

The success of the Xbox led Microsoft to create its Entertainment and Devices division under Bach. And Bach tapped the chrome-domed Allard to be his chief visionary.

Allard is a downhill mountain-biking maniac, who co-founded a cycling team, dubbed Project 529, whose name is intended to reflect the team's after-hours passion, what they do from 5 p.m. to 9 a.m. He often used Apple products, such as the iPod or the Mac, much to the disdain of some Microsoft colleagues. While he has serious technology chops, Allard also appreciated the importance of design, creating studios, rather than traditional office space, where his teams toiled. A key Allard trait: challenging convention.

Gizmodo broke the Courier story in September 2009, posting leaked pictures of what the device might look like and how it might work. Rather than the single screen that consumers have come to know as a tablet, Courier would have had two screens, each about 7 inches diagonally. The device would have folded in half like a book. It would have supported both touch and pen-based computing. The gadget-loving site drooled over what it had found.

"It feels like the whole world is holding its breath for the Apple tablet," Gizmodo wrote. "But maybe we've all been dreaming about the wrong device. This is Courier, Microsoft's astonishing take on the tablet."

The gadget was the creation of Allard's skunkworks design operation Pioneer Studios and Alchemie Ventures, a research lab that also reported to Allard. (The lab took the German spelling of "alchemy" to highlight the stereotypical Teutonic traits of structure and regiment it hoped to bring to its innovation process.) The two groups were created to identify consumer experiences that Microsoft could develop and hatch.

"Our job is to incubate those and work with the product teams to bring them to market," said Pioneer's co-founder Georg Petschnigg in a video posted to Microsoft's developer Web site last year.

Allard created Alchemie to focus on innovation process to make sure that the efforts of Pioneer were not scattershot. It studied best practices, both within and outside Microsoft, to "design a repeatable, predictable and measurable approach for building new business" for Bach's division, according to the Alchemie Ventures Toolkit, an internal Microsoft book reviewed by CNET.

"If Microsoft wants to truly implement effective and sustainable incubation, we have to embrace rigorous, repeatable, and measurable processes--and make those processes available to everyone," Alchemie's general manager Giorgio Vanzini wrote in the book.

Courier was born from the minds of both groups. And while Apple was working on its iPad at the same time, Courier was designed to be something entirely different. The iPad is all about content consumption--surfing the Web, watching videos, playing games. Courier was focused on content creation--drafting documents, brainstorming concepts, jotting down ideas.

"We weren't fearful of it," a Courier worker said of the iPad. "We were doing something different."

Early on, the group opted to use Windows for Courier's operating system. But it wasn't a version of Windows that any consumer would recognize. The Courier team tweaked the operating system to make sure it could perform at high levels with touch- and pen-based computing. What's more, the graphical shell of Windows--the interface that computer users associate with the operating system--was entirely removed. So while it was Windows under the hood, the home screens bore zero resemblance to the familiar PC desktop.

Creating a new approach
The Courier group wasn't interested in replicating Windows on a tablet. The team wanted to create a new approach to computing. The metaphor they used was "digital Moleskine," a nod to the leather-bound notebooks favored in the design world. In fact, according to a few team members, a small group led by Petschnigg flew to Milan, Italy, to pick the brains of the designers at Moleskine to understand how they've been able to create such loyal customers.

"Moleskine was interested but a little perplexed," said one executive who worked on the Courier project.

Designers working on Courier came up with clever notions for how digital paper should work. One of the ideas was to create "smart ink," giving text, for example, mathematical properties. So when a user wrote "5+8=" on, say, digital graph paper, the number "13" would fill in the equation automatically. Additionally, if users selected lined digital paper, words would snap to each line as they were jotted down.

The phrase at the core of the Courier mission was "Free Create." It was meant to describe the notion of eliminating the processes and protocols that productivity software often imposes on workers.

"Free Create is a simple statement that acts as a rallying cry, uniting the consumer's core need and Courier's core benefit," reads a passage in an internal Microsoft book memorializing the Courier effort, reviewed by CNET, that was given to the team after the project was shuttered. "Free Create is a natural way to digitally write, sketch and gather inspiration by blending the familiarity of the pen, the intuition of touch, the simplicity of the book and the advantages of software and services."

It's clear there were substantial resources behind the effort. The commemorative book, designed to resemble the journal-like look of the Courier, lists the 134 employees who contributed to the gadget's creation. Moreover, Petschnigg writes on his LinkedIn profile page that he "managed $3.5 (million) seed funding, (and) secured $20 (million) to develop this new product category."

Those funds helped build a multi-disciplinary team. It included interaction designers, who worked on new interfaces using pen- and touch-computing. There were also employees who worked on software to synchronize data from the Courier to Web-based services. The project had moved far enough along that there was staff that worked on brand strategy, advertising, retail planning, and partner marketing.
Courier even had a deeply considered logo, something of a squiggle that looks a bit like an ampersand, meant to evoke the doodling that often is the start of a creative process.

"The Courier logo expresses the free-flow and formation of ideas," reads the description of the logo in the commemorative book. "It references simple scribbles that are often the beginning of new ideas."

While the software prototypes ran on existing tablet PCs built by Microsoft's partners, they didn't meet the performance goals for Courier. So Allard's team also worked with several hardware makers, including Samsung, to create hardware prototypes.

"It was not off-the-shelf tech," said a Courier team member. "There is no commercial product today that meets the specs we had for it. It was highly demanding and innovative and no one partner had all of the pieces."

When Courier died, there was not a single prototype that contained all of the attributes of the vision: the industrial design, the screen performance, the software experience, the correct weight, and the battery life. Those existed individually, created in parallel to keep the development process moving quickly. Those prototypes wouldn't have come together into a single unit until very late in the development process, perhaps weeks before manufacturing, which is common for cutting-edge consumer electronics design. But on the team, there was little doubt that they were moving quickly toward that final prototype.

"We were on the cusp of something really big," said one Courier team member.

In late 2009, before the iPad had launched, the Courier team recognized the market for tablets was ready to explode. It laid out a detailed engineering schedule and made the case to Microsoft's top brass that Courier could be a revolutionary device that would define a new product category. The team put forward a vision that Microsoft could create a new market rather than chasing down a leader or defending an established product.

"J (was) incubating with his tribe, very much thinking consumer and very much thinking the next few years," a former Microsoft executive said. "He was trying to disrupt Microsoft, which hasn't been good at consumer products."

In fact, one of the mandates of Alchemie was to look only at product ideas and business concepts that were no farther than three years into the future. The Alchemie book includes something of an innovation process road map that lays out four "gates" that ideas needed to pass through to move from incubation to product development. And a source said that Courier had made it through all four gates.

So why did Courier die? The answer lies in an understanding of Microsoft's history and culture.